Brisbane CBD and Fringe Office Vacancy increases: renewal needed
The vacancy rate in Brisbane’s CBD office market has climbed to a new record high of 15.6 per cent over the past six months according to the Property Council of Australia’s latest Office Market Report.
While this increase in vacancy from the 14.8 per cent recorded in July 2014 is not unexpected and due primarily to negative demand, it does reinforce the need for a concerted focus on the renewal and conversion of older office buildings across Brisbane, says Chris Mountford, Queensland Executive Director of the Property Council of Australia.
“The evolution of Brisbane’s office market is continuing. Part of this evolution is an increase in the demand for higher grade office accommodation in our CBD,” Mr Mountford says.
“Over the past 6 months the vacancy rate in the premium segment of the market has dropped from 14.2 per cent to 9.1 per cent.
“While the premium segment will experience significant supply additions over the next two years, it is clear that it is the secondary office market where the long term challenge lies.
“We are now experiencing a very high vacancy rate in the secondary office sector as the city begins the transition away from the office accommodation of the past, to the office accommodation of the future.
“Vacancy in the B grade segment is now at 23 per cent. This market has experienced negative net absorption of 39,845 square meters over the past 12 months.
“Currently approximately 51 per cent of Brisbane CBD buildings are B grade or lower and it is unlikely the market can absorb this level of secondary stock without a focus from government and industry on rebalancing our accommodation offering.
“Brisbane must begin to consider potential options for conversion and adaptive reuse of older buildings into uses such as student housing, retirement living and hotel accommodation.
“The Property Council has been heartened by early conversations with Brisbane City Council about how we could work together to tackle this challenge.
“Brisbane’s Fringe market also experienced an increase in vacancy over the past six months, with levels reaching their highest point since July 2002.
“The 0.8 per cent increase to 12.8 per cent is due to additions of 34,084 square metres to the A grade segment.”
For further comment:
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Chris Mountford |
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Analysis & Commentary – Brisbane CBD, January 2015
Headline comments:
- Brisbane CBD vacancy increased in the 6 months to January 2015 to a new record high
- This was mainly due to negative demand
- There is a significant amount of office space due to come online over the next 2 years
Vacancy analysis:
- Brisbane CBD’s vacancy rate increased from 14.8 per cent to 15.6 per cent, up from the previous record high six month ago
- This was mainly due to negative demand
- Net absorption was -23,989sqm
- Supply additions totaled 3,613sqm
- There were 8,910sqm of withdrawals
Future supply:
- A total of 59,584sqm of office space is due to enter the market in 2015
- 128,853sqm of office space is planned for 2016
- 114,081sqm of office space is mooted
Key market indicators, Brisbane CBD (aggregate)
|
Grade |
Vacancy, Jan 15 (%) |
Vacancy, Jul 14 (%) |
Net absorption, 6 months to Jan 15 (sq m) |
Net absorption, 12 months to Jan 15 (sq m) |
|
Premium |
9.1 |
14.2 |
10,354 |
7,523 |
|
A |
11.1 |
10.5 |
-5,161 |
-2,043 |
|
B |
23.0 |
20.1 |
-28,887 |
-39,845 |
|
C |
12.1 |
11.7 |
-792 |
1,127 |
|
D |
16.6 |
16.8 |
497 |
98 |
|
Total |
15.6 |
14.8 |
-23,989 |
-33,140 |
Analysis & Commentary, Brisbane Fringe, January 2015
Headline comments:
- The Fringe market’s vacancy increased over the period to its highest level since July 2002
- This was due to supply additions
- Only A Grade space reported an increase in vacancy over the period
Vacancy analysis:
- Brisbane Fringe’s vacancy increased from 12.0 per cent to 12.8 per cent, the highest since July 2002
- This was due to 34,084sqm of supply additions
- Net absorption was 13,063sqm while withdrawals totaled 8,394sqm
- With the exception of D Grade, all grades of space have double digit vacancy
- D Grade vacancy remained at zero
Future supply:
- A total of 16,0sqm of office space is due to enter the market in 2015
- 22,000sqm of office space is due to be completed in 2016
- 62,748sqm of office space is mooted for this market
Key market indicators, Brisbane Fringe (aggregate)
|
Grade |
Vacancy, Jan 15 (%) |
Vacancy, Jul 14 (%) |
Net absorption, 6 months to Jan 15 (sq m) |
Net absorption, 12 months to Jan 15 (sq m) |
|
A |
12.1 |
9.5 |
13,541 |
20,804 |
|
B |
15.4 |
16.0 |
-2,997 |
1,680 |
|
C |
11.0 |
12.6 |
2,519 |
7,3 |
|
D |
0.0 |
0.0 |
0 |
0 |
|
Total |
12.8 |
12.0 |
13,063 |
29,987 |
More information available at www.propertyoz.com.au/officemarketreport